I never pay full price for clothes unless I’m buying a gift for someone else (and even then, I save if I can.) I know many people buy their clothes on consignment or at closeout stores like Ross and Marshall’s, but I’m not one of them. I always find shopping at these stores to be more effort than it’s worth. Instead, I stick to stores I trust.

Major department stores always have clothes on sale, but you can also find deals at the boutique chains if you know when to shop. Here are my tips for finding discount clothes:

Discount Women’s Clothing
I generally wear clothes from one store: Ann Taylor Loft. They’re well-made, they fit me, and they last a long time. Because I’m loyal, I never have to pay full price. In addition to shopping their sale section twice a year to refresh my seasonal items, I also receive regular discount emails. If you don’t receive discount emails, sign up at their website or look for coupon codes.

Here’s the trick: Shop only at a store with online shopping and in-store returns. Buy enough to qualify for the highest discount possible and receive free shipping. Then return what you don’t like to the store. In the fall, they also offer $25 off a purchase of $50 coupons. If you watch the dates, there’s usually a slight overlap between the start of the offer period and the end of the discount period so you can buy clothes at a discount and still receive the coupons.

Discount Baby/Kids Clothing
Target is the first choice for young parents. Even at full price they’re cheap, but they frequently have sales. When the price ends in a 4, snap it up. That’s the lowest it will go. Wise Bread offers additional tips for shopping smart at Target.

I’ve also spotted great prices and sales at Old Navy. Kids grow fast, so there’s no reason to spring for the pricey duds. However, if you like expensive clothes, watch Craigslist for warehouse and consignment sales like the one in Los Angeles. These happen all over the country and I’ve seen reports of moms buying $50 Gymboree outfits for $5.

Discount Seasonal Clothing
Did you ever wonder why department stores put clothes on the floor months before you want to buy them? It’s actually a century-old practice. Back in the late 1800s and early 1900s, clothing had to be ordered in advance. The wealthy would travel to Europe in the fall to buy their clothes for the spring. Although we don’t do that anymore, department stores still buy their clothes two seasons early, which means they hit the floor at least one season early.

In general, the clothes will already be on sale if you wait until the proper season to buy them. You can save even more by buying your clothes a year early. If you’ve worn something out by the end of a season and you want a classic replacement, buy it at the end of that season and save it for next year. For example, you can score cheap winter coats in March. Always stick to classics when buying early. Trendy items will probably be out of style by the time you pull them out of the closet next year.

Discount Shoes
Shoes are another area where it’s easy to save big. I buy them from shoe warehouses and I buy them late in the season to save as much as 50% off retail. For example, I recently bought two pairs of boots. The original price was $70 each. The warehouse price was $40 each. Because it was late in the season, they were 30% off. I then used an additional coupon. I bought both pairs of boots for $55 with tax, and received a $5 coupon for next time.

Discount Men’s Suits
Items like suits can be expensive, but you can still shop wisely. We’ve found that it’s best to avoid the uber-cheap suits. They wear out quickly, which means you replace them more often. Instead, we shop the semi-annual men’s sale at Nordstrom, big suit sales at Macy’s, and local suit discounters like 3-Day Suit Broker. We buy high-quality name brand suits for 50% off retail. When shopping for suits, look for super 100 or 120 wool. Although the higher grades sound better, they actually wear out more quickly.

These strategies save me at least 30% off my annual clothing budget. I buy clothes that will last a long time, which also keeps my spending down. If you have other strategies for saving money on clothes, let me know in the comments.

This month, the Money Blog Network’s group project is budgets. I’m not in the MBN, but I’ve decided to post a blog about my method for creating a cash flow budget. It’s far more effective for my husband and me than a traditional category-based budget. MBN lists several other budget posts on their site, if you want to test a few different budgeting, and anti-budgeting, methods.

The Monthly Budget by Category
My husband and I use Quicken to track our daily spending. About once a year, my husband and I run out a Quicken budget, just to see how our actually monthly category spending has changed. Then we copy it into Excel so we can play with the numbers: how much more we would have if we paid off this loan or reduced that expense.

This is an example of what that would look like. If I were studying this, I would see that I could cut the dining budget and might consider reducing utilities expenses if possible.

Sample Monthly Budget by Category

The monthly budget is a helpful way to get an idea of how and where we spend money on average, but it isn’t necessarily useful for planning our monthly cash flow. The budget averages out our expenses rather than showing the blips as they actually occur. For example, auto-insurance isn’t paid monthly, but it appears that way in a budget. We have to plan for the blips, not the even keel budget. Instead of a line-item budget, we use a cash flow statement to plan our monthly bills and spending.

The Cash Flow Budget
The cash flow budget is a much better picture of our expected income and expenses for the month. These are actual bills we must pay, rather than categories that may vary every month. For example, if it’s an auto insurance month, then we know to reduce our spending in other areas to make up the difference. It also helps us plan our debt repayment because we know how much we’ll have leftover at the end of the month.

This is a sample of a cash flow budget for February. You’ll note that the numbers above don’t match the numbers here. There are two reasons: 1. I made many of the numbers up, and 2. Most of our recurring charges (utilities, cell phone, gym, etc.) are on one of the credit cards, so we don’t pay them as a separate monthly bill through our checking account.

Expected bills with variable due dates (like a bi-monthly utility) go at the bottom because we know they’re coming at some point, but not when.

At the beginning of the month, we look at our Quicken account balances for variable bills like credit cards and ballpark the payment amounts in our cash flow chart. We adjust with exact figures as the month proceeds and the bills come in. At the end of the month, we take the end number and add it to our debt payments for the next month. Once our debts are gone (except some student loans), that end number will go towards other goals like savings or investments.

In addition, it helps us see where the bills fall in relation to our income. For example, if we plan to make a big credit card payment, but know that the deposit that covers it doesn’t occur until two days later, we can reduce the payment. Then we can schedule another payment after the deposit.

Creating a Cash Flow Budget
If you want to create a cash flow budget, follow these simple steps:

  1. Get out your checkbook register.
  2. Create an excel chart with payment dates and amounts for all expenses for the last six months. Rather than the generic terms I use above, use the names of the payments, like Amex, Discover, and Sallie Mae.
  3. Use three columns for each month like in the above chart. We go across the sheet for each new month rather than down so several months fit on the screen at once. Although you’ll have to tweak it as time progresses, this gives you a good overview of when your various bills are due.
  4. Just before each month, review the expected expenses for that month and make adjustments for changes in your finances. Also review the previous month and carryover any remaining balance to the next month.
  5. At the end of the sixth month, copy the last month over to new columns and update the dates and amounts for month seven.

Once you get used to this system, you’ll probably find that you feel more comfortable with your finances because you always have a snapshot view of them. It doesn’t require special software and no one else has access to your data. If you don’t have Excel, you can use an OpenOffice or GoogleDocs spreadsheet, instead. This is very different from the system I used when I was single, but I much prefer it. Give it a try, you might like it!

Yesterday I reviewed strategies for saving money on personal books. As a recent grad student, I also have several strategies for saving money on college books. These are my top methods, but you can also use sources like on-campus exchanges, off-campus exchanges, and Craigslist to find books.

Request Books from the Library
Years ago, I was contracted to write a how-to book. It was an area I had expertise in, but I needed to heavily research some side topics and related history. I’m fortunate to live in Los Angeles, which means I can search the massive LAPL catalog online and request that any book not in the reserve section be sent to my nearest branch. I ordered and checked out 40 books. By tracking due dates online, renewing online, and scheduling regular trips, I avoided any late fees. I believe I spent a total of $12 on books to research that project.

If you have access to a college library, you’re in even better shape. Most college libraries are more extensive than public libraries. In addition to a massive print collection of obscure academic titles, my school had some books available electronically, either directly through my library or through their associations with other university libraries. They can also borrow print books from many other major universities, so you can find almost any book you need. There may be a fee for undergrads, so you may want to ask your professor to order it if you really need it for a big project. If you don’t know how to find these resources in your library, ask the librarian in the reference section for help. They’re more than happy to show you how to find what you need or help you track down alternative sources.

Buy College Texts Online
Half.com is an excellent way to save money on books for students, especially humanities students. You can often get them from the library, but I preferred to own them so I could mark up relevant passages. Nothing angers me more than checking a book out of the library and discovering that someone has written in it. I found that most books from Half.com weren’t written in. If they were, the description indicated that.

I’ve also found some science textbooks in the used section of Amazon and Half.com. Here’s a little known fact about the real reason textbooks cost so much: updated editions. Publishers will release an updated edition with only a few changes, but it forces many students to buy books new. For most majors, you can probably use a textbook that’s a few years older and get the same information for much less. Shakespeare’s words haven’t changed in 400 years. There’s no reason to buy the brand new, updated compendium when you can get one a few years older for less. Obviously, some majors like computer science might require new texts because of the frequency of important changes. If you’re not sure, ask your professor if the older edition still applies.

Some textbooks are also bundled with workbooks, CDs, or software that you’ll never use. Unless your professor specifies that you need them, buy a copy without the extras and you’ll save serious dough.

The key to this strategy is ordering ahead so you have the books on the first day of class. Here’s how I did that:

  1. Check the online synopsis, if available, 3-4 weeks before the class starts. Note titles, authors, edition numbers, and whether the book is required or optional
  2. Check the online college bookstore for the book list. Note the above information and the ISBN number.
  3. Search Amazon and Half by ISBN number for the required list and decide whether you want the optional books. See if you can find all the books you need from just a few different sellers to reduce shipping costs. In most cases, you can buy the books cheaper online, but if you only need a few, it may be worth it to stop by the school bookstore a few weeks before class and buy the best used copies there.
  4. Factor in shipping and tax (where applicable) when comparing the online and campus bookstore costs, then go to the cheaper place.
  5. If you’re buying online, order the books at least two weeks before class starts to ensure they reach you in time.

Access Free Books Online
If you’re really strapped for cash, look for public domain books online. The biggest source is Project Gutenberg. They offer over 17,000 ebooks (pre-1900 mostly, but some early 1900s texts have now fallen out of copyright). You can also Google the title to find all free online sources. I’ve also used this for poems and short stories where I didn’t want to buy a whole book for just three poems or one story. Author society websites (e.g. the Jane Austen society), academic websites, and fan websites are good places to start.

Using these strategies, I spent no money on research texts for various papers and projects during my grad school career. In preparation for my comprehensive exam, I spent about $100 on 40 books. Once the exam was over, I resold most of them and earned back most of what I’d spent. I probably spent around $50-100 per semester on books, but I was able to resell most of them for nearly what I paid for them.

One of my financial resolutions for the year was to track my spending for one month. I chose January in order to start the year off with a bang. Recording my purchases wasn’t really that challenging. It helps that I’m something of a miser, and therefore don’t really spend much money to begin with.

For my records, I only tracked money I personally spent. I didn’t track the bills my husband paid or his spending. He probably does more day-to-day spending than I do and does much more business travel than I do.

I normally carry a small notebook with me, so I designated two pages for tracking spending. I recorded the date, store, general purchase category, amount, and whether it was cash or charge. I didn’t break my numbers down further, so there might be non-food expenses in the grocery expenses if I bought them at the grocery store (items like cleaning products.)

Books: .94 (plus $25 gift card)
Groceries: 393.90
Dining Out: 23.59
Post Office: 5.69
Fuel: 55.68
Charity: 4.90
Clothing: 90.32
Travel: 11.32
Home Office: 70.08
Laundry: 10
Household: 34.29

Total spending: $700.71

Of that, $580.76 was charged. I’d say that $104.11 was discretionary spending, the rest were necessities.

The stores I visited were Borders, Ralph’s, Trader Joe’s, Whole Foods, El Torito, Exxon, Staples, Amazon, Target, USPS, a disabled homeless man outside the post office, Shell, Shoe Warehouse, Rite Aid, CVS, airport restaurant.

Over the course of the month I was comforted by the fact that I don’t have much wasteful spending, but I also spent more than I thought I did. If I were looking for places to cut my budget, it would have to be in the $104 of discretionary spending. Over the course of the year, that would amount to over $1200, which is not a small number. I could also try to trim away at food expenses, although $100 a week to eat good, healthy food isn’t excessive. It works out to about $2.77 person/meal. I’ve already cut back my driving as much as possible.

In all, I’m fairly happy with my spending levels. Recording my spending didn’t really alter my habits because I don’t overspend to begin with, but I see how it could make some people reconsider purchases. If you haven’t tried it, I recommend it for one month just to get a better idea of where and how you really spend.

I’m not a Valentine’s Day scrooge. I have celebrated the day with great fanfare in the past – usually early in a relationship. Now that I’ve been with my husband for nine years, the day is becoming less important to me. Also, I don’t find being surrounded by hordes celebrating enforced romance the least bit romantic.

I also recognize that most of the Valentine’s Day pressure is a result of women’s expectations. If men had their druthers, the day would vanish. I see their point. We women have been trained to expect diamonds, roses, and lavish dinners on February 14. That can get quite pricey for men.

Five Inexpensive Valentine’s Day Ideas
Here are a few simple ideas to make Valentine’s Day cheaper and yet still enjoyable.

Change the date: This year it falls on a Thursday. Who wants to rush out to dinner on a Thursday? Instead, go out on Friday or Saturday this year. Not only will the restaurant be less crowded, you’ll probably get the same food without the special, overpriced “Valentine’s Day menu.” True, you might sacrifice the rose or little chocolate the restaurant gives you, but are those little extras really worth the additional cost? We did once go to a very nice restaurant on Valentine’s Day and get the prix fix meal, but we found the service harried and the dinner not quite worth the price. I didn’t even get the promised rose.

Enjoy a romantic dinner at home: Light candles, set a nice table, and then serve up your favorite foods. Chicken Marsala with roasted red potatoes and a nice wine would be delicious, and remarkably easy to prepare. Or you could kick the romance up a notch and choose foods you can feed each other, like cheese fondue or a dessert of chocolate fondue.

Skip (or delay) the flowers and jewelry: Both of these are significantly marked up for Valentine’s Day. The price of roses doubles, especially since they’re not in season this time of year and have probably been flown in from Ecuador.

If you still want flowers, order them the next day. One year, my husband bought me a pretty bouquet on February 15. I returned home from work to find it on the kitchen table. I was stunned and delighted, and it cost him 50% less. If you opt for this, skip the roses. They will be leftovers from the day before and probably not in great condition. Instead my arrangement had irises (my favorite) and “filler” flowers that lasted for over three weeks.

Buy a card: I like to receive a card from my husband on Valentine’s Day. He has yet to fully grasp that “not doing anything” means “exchanging cards,” but I do buy him a card. Apparently 85% of Valentine’s Day cards are bought my women. I prefer funny cards, which are usually around to $2. Sappy cards can get as high as $10, but I’d aim for $5 maximum for a card that will only wind up in a recycling bin in a few days.

Buy small yet decadent chocolate gifts: At least for women. My Dad loves a See’s chocolate assortment. My mom and I would rather receive one really decadent piece of chocolate than deluxe Valentine’s Day gift baskets. If you have a chocolate-lover in your life, visit a gourmet chocolatier to buy one or two very good truffles. That will run you about $5.00 and no one has to feel guilty about the calories and fat. They taste better, too.

Some people insist on going all out for Valentine’s Day, but I don’t think you have to focus all your romantic energy on one day. I’d rather find small, affordable ways to celebrate our relationship year-round.

What are your ideas for saving money on Valentine’s Day?

There are a few TV shows I love. I make an appointment to watch them every week, but I don’t watch much TV beyond those. But now I have a problem – because of the writer’s strike, most of those shows I watch are off the air. A few of them have only recently started, but I know they’ll be gone in a few weeks, too. I’m so accustomed to watching TV at a certain time that I find myself endlessly channel surfing just looking for something to watch. That has to stop, but I don’t want to spend a lot of money going out to movies. It’s too cold to engage in outdoor activities, so I’m stuck inside looking for stuff to do that doesn’t involve the computer.

Here are a few of the ways I came up with to reduce my total entertainment cost now that there’s so little good TV to watch:

Subscribe to Netflix or Blockbuster Online
There aren’t many TV series I want to watch that I haven’t already seen, but you can get full seasons of TV shows from Netflix or Blockbuster online. I’m thinking of adding season one of “Psych” to my list because I’ve only seen some of them. Then you can watch them one hour a day to fill a slot where you used to watch some other show. You can also catch up on all those movies you’ve been wanting to see, but missed in the theater. I figure that we can watch 100 movies this year if the strike goes through the fall TV season. It’s certainly better than “American Gladiators.”

I know, a lot of people don’t like to read. Fortunately, I’ve been a voracious reader my entire life. Currently, I have a pile of 26 books that I’ve been meaning to read. I own them, but I got most of them for free at various events. The local library is one reason I haven’t gotten through them. Whenever I hear about a book, I order it online from my library system, and then I can pick it up a few days later. The downside to having such a huge library system available is that I’ve ordered so many library books that I haven’t had time to burn through my TBR pile!

If your kids think reading is boring, let them choose the book, and then read it together as a family. You can all read aloud, or you can read one chapter a week together and set a time to discuss it. I hear the latest Caldecott winner, Brian Selznick’s “The Invention of Hugo Cabret,” is a big hit with kids. Your library may have a waiting list for it, but the librarian can recommend alternatives while you wait.

Take Up an Inexpensive Hobby
Besides, reading, you could also take up a few inexpensive hobbies. If you’ve always wanted to learn to cook, get some cookbooks from the library and teach yourself. Visit an art store and buy inexpensive art supplies to practice painting, ceramics, or another hobby. I don’t recommend scrapbooking if you want to be frugal, but you can find other options.

Since there’s nothing good on, why not go to the gym? If you have a low stool and a couple free weights, you could work out at home instead. My cable provider offers free exercise classes in the OnDemand section. You can also find free online routines at many women’s magazine sites like Self and Women’s Health. You could test-drive videos through your Netflix or Blockbuster account or the library. I use a printed out routine and watch the Food Network while I workout at home. For some reason, it motivates me.

Play Board Games
I have several board games, ranging from Checkers to Risk. If you have a simple dominoes set, you’ve got several games right there. These are fun all night long and also count as quality family time. Schedule a game night with some good munchies and I doubt you’ll hear many complaints. I loved playing games with my family when I was a kid. I still do.

Attend a Free Cultural Event
Sometimes, the local symphony will hold a free family night, or the library or bookstore will hold a reading. Pack up the family (for family appropriate topics) and take everyone along. If it’s just you and your spouse, you have more options to choose from. Find a free local paper and check the calendar section for upcoming events.

Invite Friends Over for a Potluck
Entertaining can be expensive, but not if you ask everyone to bring something. Every time I have people over, they always bring food even if I don’t ask. This way, you can suggest a course so you don’t have six entrees and a bottle of wine. As a bonus, you can keep the leftovers and have food for a few more days!

These are just a few things you could do to reduce the entertainment cost section of your budget. I’m sure if you get off the couch, or away from the screen, you can find a few more frugal ways to entertain yourself and your family when there’s nothing to watch on TV – and even when there is. Consider this your opportunity to wean yourself from the box.

I’m blessed to live in Southern California. The shiny brochures advertise it as the land of the sun, sand, and surf. That’s true – in the summer. For those of us who live here, winter is cold. Visitors from say, Iowa, may be content to walk around in shorts in January, but Southern Californians are ready to crank up the heat when the temperature dips below seventy. (I never said we were a hardy people.) Certainly, our heating costs aren’t as high those for people who live in Minnesota, but thanks to California’s screwed up energy regulations, our costs aren’t small, either.

So here are my tips for reducing winter energy costs:

Install a thermostat with a timer. My heater is set to turn on about half an hour before we get home at night and half an hour after we go to bed, then to turn on again half an hour before we get up and ten minutes after we leave (to allow for running late.) That means our heat is on for approximately seven hours a day, but not continuously. It only warms the room when it falls too far below our preferred temperature. Since my thermostat is also somewhat broken, that’s 72 degrees. I know that some experts recommend 68 degrees, but our apartment isn’t well insulated and that doesn’t get the chill out of the air.

Dress warmly and use blankets. Before you go turn the heat up any further, put on a sweater and socks. You might even consider a ski hat. That will reduce the heat loss from your body and will make you feel warmer. If you’re just sitting on the couch watching TV, use a throw blanket to keep warm. We have two chenille throws in the living room so we can cover up when it gets a little chilly. As an added bonus, the throws are also excellent ways to cover gaps in the sofa slipcover from that time the dry cleaner shrank it. Just artfully drape the blanket over the gap in the zipper and now the damage is hidden from guests.

Seal pipes, doors, and windows. If you own your home, check the pipes, doors, and windows for leaks, and then do what you must to repair them. This could mean replacing old windows with new, more energy-efficient models, re-caulking, applying duct tape, or putting a film over the windows to lock in heat. If you rent, you can at least close the drapes at night to keep the heat in. Ask your landlord if you can film the windows.

Check your furnace. You should change your air filter at least twice a year. Mark it on your calendar. You may also want to vacuum the vents. The easier it is for the air to flow through the vents, the faster your home will heat. If you have an old furnace, consider replacing it with a new energy efficient model. Although a new furnace is expensive, over time it will more than pay for itself.

Close the fireplace damper. If you’re not using your fireplace, close the damper to prevent cold air from blowing in or warm air from drifting out.

Close vents in unused rooms. If you’re not using a room, close its vent. There’s no reason to heat an empty room.

Replace lightbulbs and old appliances. Remember, that although winter heating takes up about 50% of your energy bill, your lights and appliances still impact your energy bill. By using more energy-efficient appliances and buying Energy Star appliances, you can reduce your total energy bill. By the same token, turn off the lights when you leave a room and turn off any appliances you’re not using. The printer doesn’t need to be on all the time. Unplug your cell phone or battery charger. The little things do matter.

If you follow all of the above tips, you can reduce your energy costs without feeling cold. Visit the following sources for more tips:

For everyone: SmartMoney

For homeowners: Consumer Energy Center

For renters and condo-owners: Focus on Energy

Even if you have insurance, health expenses can surprise you. Last year I used my vision insurance to visit the eye doctor for new contacts and glasses. I went in accustomed to paying around $200 a year for those expenses. I left with a $900 charge on my credit card (partly due to error and party because I switched to the “Rolls Royce” of contact lenses.) I checked the receipt and got a refund for the error, then sorted out coverage with my insurer for another part, but it still cost in the range of $500. Then I went to the dentist and learned I needed a crown. Fortunately, my dental insurance covered nearly 100% of the cost rather than the 50% they said they cover, so the two expenses balanced out somewhat.

Still, if I’d planned ahead, neither expense would have been a shock to my budget. I don’t have access to a Health Savings Account (HSA) or a Flexible Savings Account (FSA), but that doesn’t mean I can’t plan ahead for medical and health expenses. If you do have access to either of those accounts, then you have several options when it comes to saving for health expenses.

Health Savings Account
The HSA is relatively new. It was introduced in 2004, and some employers offer them along with high deductible health plans. The idea is that you use the HSA to pay for qualified health expenses until the deductible is spent, at which point insurance kicks in. In 2008, you can contribute up to $2800 for a single person and $5900 for a family. Contributions come from pre-tax dollars, which reduces your tax base, and employers can also contribute. The downside is that you can’t withdraw the money for non-medical expenses without paying taxes and a 10% penalty (unless you’re over 65, in which case you only pay taxes.)

Most medical expenses qualify, but not all. You can use the funds to cover:

  • Co-pays
  • Deductibles
  • Prescriptions
  • Over-the-counter medications for defined conditions (like allergies)
  • Glasses
  • Hearing aids
  • Dental expenses
  • Vision expenses
  • Transportation related to medical care

You don’t have to pay the funds directly to someone, but can use it to reimburse yourself for the expenses. You do have to keep receipts to document the expenses, though. You can use the funds to pay expenses even for spouses and dependents who aren’t covered by your high-deductible health plan, but you can’t use it to pay their premiums.

The nice thing about the savings account is that you don’t lose it if you don’t use it. You can roll it over when you change jobs. If you die, it transfers to a beneficiary with no limits on how he or she can spend it.

Flexible Spending Accounts
Many employers offer FSAs. These are also funded with pre-tax dollars, up to a cap of $5000, and are used for similar expenses as the HSA. The trick is that you do lose the funds if you don’t use them by the end of the plan year. Also, if you change jobs, you can only use it for expenses incurred while you were covered by the plan. On the other hand, all funds are available on day one of the plan year, even if you contribute to it with funds from each paycheck. If you plan to switch jobs, get your expensive medical treatments before you leave the plan so you can spend down the money.

Personal Savings Account
If you’re like me and don’t have one of those plans available, you can create your own account to cover health expenses. It won’t reduce your tax base or use pre-tax dollars, but it will collect interest if placed in a high-interest-rate savings account. Simply visit a bank, or online bank, that offers no-fee savings accounts and set up direct transfers from your checking account every month. Then when you have health expenses, reimburse yourself from the savings account. If you don’t spend it, you’ll still have the savings.

This is especially helpful for people with individual health insurance instead of an employer-provided plan. Rather than spending an extra $200 a month to reduce your deductible by $1500, put that $200 a month into the savings account. Then if you need it, you can pay towards your deductible, if you don’t, you still have the money.

Determining How Much to Contribute
Before you contribute to any account, figure out how much you usually spend on health expenses. Get out your receipts for last year and total up how much you spent on co-pays, deductibles, emergency room visits, lab fees, dental costs, eye exams, glasses, the chiropractor, prescriptions, and over-the-counter treatments for colds, allergies, and other defined conditions. That’s approximately how much you should contribute to your savings account or spending account. You may want to add a small cushion, especially if you have young children. Add more if you’re pregnant or have an ongoing condition that may require additional treatment.

Regardless of which plan you choose, it’s a good way to cover health expenses without going into debt or running up credit card interest for unexpected costs.

If you were counting on a holiday bonus or tax refund to pay off your holiday charges, you may not be able to. According to Hewitt Associates, 63% of companies surveyed don’t plan to give holiday bonuses this year. Due to the credit crunch, many businesses that previously offered bonuses have had to forgo them or scale them back. There’s a silver lining – many companies are switching to performance-based bonuses during the year – but that won’t help you now. To add to the burden, tax refunds may be delayed by up to seven weeks because of the late passage of the alternative minimum tax patch.

So, rather than that January or February payment you planned on making, it could have to wait until March. That means you’ll be racking up credit card interest on your holiday purchases for three months. Depending on your APR, that could total an additional $50 or more that you hadn’t budgeted for.

If you face this situation, use the first three tips to reduce the interest costs this year, and then use the second three tips to avoid interest next year.

Three Interest Rate Reduction Tips
Ask for an interest rate reduction.
If you have a good record of on-time payments, call your credit card issuer and ask them to reduce your interest rate. If you have a balance transfer offer in hand, tell them that. They may be willing to match the offer.

Do a balance transfer. Search for a card with 0% interest and no balance transfer fees. Even if the offer is only good for six months, that should be long enough to get your refund and pay off the bills, or to cut expenses in other areas so you can pay the holiday bills. You may also receive offers from credit cards you already have. If so, then using one of those instead of adding a new card to your credit report might be a better option.

Take a loan from your emergency fund. Normally I don’t recommend raiding your emergency fund for expenses like this, but this year, you may want to borrow the money for now and then replenish the fund when your refund comes.

Three Tips for Avoiding Interest Next Year
Change your withholding.
If you get a tax refund every year, then you’re having too much withheld from your paycheck. There’s no reason to give Uncle Sam an interest-free loan. Instead, use the withholding calculator at IRS.gov to determine how much you really need to withhold, and then file a new W-4 with your employer.

Create a Christmas account. A few decades ago, employers and banks let people create Christmas savings accounts. Most of those have been discontinued, but you can create one on your own. The easiest way is to set up an account at an online bank. Rather than spending the increased amount you received from reducing your withholding, deposit it in the savings account. You may also wish to deposit performance-based bonuses into the account. Then you can use that money to pay cash for Christmas and holiday expenses or to pay your credit card bills as soon as you receive them.

Set a budget and stick to it. Overspending is one of the reasons many people have to pay credit card interest on holiday expenses. Next year, set a budget for your holiday expenses, create a Christmas shopping list, and stick to it.

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